(click on graph to enlarge)
Household debt in the US spiked to the highest level since 2007. According to the Federal Reserve Bank of New York, Americans accumulated an additional $1 trillion in debt, with the figure growing by $333 billion in Q4 alone.
Mortgage and auto loans are the main sources of debt for Americans. Home loan originations hit a record high last year thanks to low rates, and mortgage debt increased by $258 billion in Q4 to $10.94 trillion.
Balances on auto loans rose by $15 billion in Q4, and $84 billion over the course of the year. Around $734 billion is attributed to new auto loans in 2021 to a total of $1.46 in auto loan debt. The Fed noted this was the largest volume on record. The chip shortage and supply chain crisis have caused auto prices to spike by 20% on average. The current median monthly payment on a car loan is $418 per month.
Credit card debt also rose as well, increasing by $52 billion in Q4, marking the largest increase on record. On a positive note, card balances are $71 billion lower than they were at the end of 2019.
The International Monetary Fund has warned that high household debt hinders long-term GDP growth. “Our study found that a 5 percentage-point increase in the ratio of household debt to GDP over a three-year period forecasts a 1.25 percentage-point decline in inflation-adjusted growth three years in the future. Higher debt is associated with significantly higher unemployment up to four years ahead. And a 1 percentage point increase in debt raises the odds of a future banking crisis by about 1 percentage point. That’s a significant increase, when you consider that the probability of a crisis is 3.5 percent, even without any increase in debt,” the IMF stated in a report released in 2017. In the short-term, increased debt will provide a small boost to the nation. If inflation persists and people are required to take on more debt for essentials like transportation and shelter, the nation’s GDP will be at risk.
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
-----------------------------------------------------
To donate via Stripe, click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)
Debt is incentivized.
Started small, I suppose. Bar tabs & store credits, “layaway.”
But “your biggest investment” has been mortgage interest deduction tax “code” (for what, do you suppose? could we call it ruination?) incentivized for a long time. Once that became normalized the sky was the limit.
Rentacenter will grant onerous credit terms on a couch, the bigscreen to put in front of it, & a pimped out wristwatch so you can keep track of the time & not miss the games, movies, shows….
But debt replacing equity started “at the top” & rolled downhill.
That it’s skydiving with evermore poorly packed ‘chutes, & then ultimately no ‘chute at all is no sweat in Suspended Humanimation, which forgets all about gravity, stops “believing” in it.
But gravity don’t know you nor care what you believe.
This cannot ever be repaid.
That is impossible.
It’s going to end though.
Prepare for what that means to you and your family.
And that doesn’t include the addition many trillions the government criminals have added.
Wife and I make pretty decent money combined. I drive a 2015 truck and she drives a 2014 SUV. I look at car prices and wonder who can pay what they are asking? Hell, I’ve seeing new Tundras at 10K over MSRP. I can’t afford one and only have mortgage debt. How can others afford them that probably make less than we do?
Everyone who has 0 debt vote up. Everyone who has debt vote down.
Just a little unscientific poll.
This never gets old.
It is real simple. People are borrowing the money to live because their income is not keeping up with their expenses. Of course the majority of them are supporting a lifestyle way above their income, by the use of easy credit.
This is all going to change going forward and it is going to be very ugly. The irresponsibility of the Federal Government and the Federal Reserve has now unleashed the Kraken known as the inflation feedback cycle. This is when inflation becomes so high, producers must raise prices in anticipation of inflation to keep from losing money. Once this starts, it takes drastic measures to get it under control. The last time this happened, it took 17% interest rates and a massive recession to get things under control.
Some people think that the Fed will not take these drastic actions because of the adverse effect it will have on the economy. This is a naive and uneducated position. The fact of the matter is that about 40% of dollars are held overseas, and if the stability of the dollar becomes questionable, those overseas dollar holders will start to dump their dollars in favor of more stable currencies. That would be a disaster. It would threaten the status of the dollar as a reserve currency and make the possibility of a collapse of the US economy a reality. We live in a house of cards, and that house is only supported by the reserve currency status of the dollar. Given the choice, the Fed will crash the economy and let people starve before they will allow the dollar status to be threatened.